Phila. Wants Wells Fargo to Turn Over Audits in Discrimination Row

The motion to compel says Wells Fargo is improperly "filtering" documents requested by the city and refusing to turn over any audits that do not specifically deal with both mortgage lending in Philadelphia and discrimination.

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As part of its efforts to hold Wells Fargo civilly liable for alleged discriminatory lending practices, Philadelphia is demanding that the lending giant turn over its internal and compliance audits.

The city on Thursday filed a motion with the U.S. District Court for the Eastern District of Pennsylvania asking to have the court compel all audits and audit-related documents related to the company’s compliance with the federal Fair Housing Act when it comes to underwriting, purchasing, pricing or selling loans to minority residents of Philadelphia.

According to the motion to compel, Wells Fargo is improperly “filtering” the documents the city has requested and refusing to turn over any audits that do not specifically deal with both mortgage lending in Philadelphia and discrimination.

“These unilaterally-imposed ‘filters’ are contrary to the federal discovery rules, and ignore basic realities of how Wells Fargo functions as a national bank,” the city said in the motion, which was filed by Berger Montague attorney Sherrie Savett. “Wells Fargo’s relevance objection is specious, and its refusal to even describe the responsive documents in its possession, custody or control as part of the meet and confer process, much less log any responsive audits it purports to be privileged, is inappropriate.”

In a statement issued Thursday afternoon, a spokesman for Wells Fargo said in an emailed statement, “Wells Fargo objects to the city’s overly broad and improper discovery requests.”

A spokesman with the city Law Department declined to comment beyond the filing.

The lawsuit is the first that a city has lodged against a financial institution since a recent U.S. Supreme Court ruling established that municipalities have standing to sue banks over allegedly discriminatory lending practices.

The complaint, which was filed Monday in the U.S. District Court for the Eastern District of Pennsylvania, focuses on lending practices that occurred between 2004 and 2014, and contends that the allegedly discriminatory conduct caused high foreclosure rates in minority neighborhoods and lowered tax revenues that the city otherwise would have collected.

Wells Fargo, however, has fought back in a motion to dismiss, contending that the city’s arguments were too much of a stretch to proceed and would require six steps to establish a connection between any allegedly discriminatory loans and the city’s claimed injuries.

Earlier this year, the judge overseeing the case denied that motion, but gave the bank leave to refile it at a later stage.

Regarding the discovery dispute, the city said it made requests for any audits or analysis performed by external auditors that relate to the banking company’s compliance with federal fair housing laws. After the company contended that it did not internally audit its compliance with the Fair Housing Act or other anti-discrimination laws, the city cited the company’s annual reports and a complaint the U.S. Department of Justice filed against the company in 2012, which referenced an internal system monitoring compliance, the motion said.

The city said it made repeated attempts to clarify that it was not seeking solely internal documents, or audits that were specific to Philadelphia, however, the company continued to limit its search to documents that specifically analyzed both lending practices in Philadelphia and discrimination—documents the company said do not exist.

Philadelphia said there is no question relevant documents exist, and those documents should be turned over.

“There is no question that Wells Fargo’s efforts, or lack thereof, to monitor its lending practices and implement an appropriate risk management and internal control framework represent core issues in this case, going directly to an element of the city’s disparate impact claim,” the motion said.

Read the motion here:

Max Mitchell

Max Mitchell is a reporter with The Legal Intelligencer, focusing on litigation in Pennsylvania with a specific emphasis on Philadelphia courts. Follow him on Twitter @MMitchellTLI.

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